Stakes High in Marina Dispute : County Wants Bigger Bite, Businesses Fight Hikes

Marina del Rey is the most valuable and profitable piece of property that Los Angeles County owns: 804 acres of land and shimmering water along a prime stretch of coastline.

Privately operated apartments, boat anchorages, restaurants and shops in the marina brought in $215.7 million last year. The county skimmed off $11.5 million in rent, about half of which is needed to provide services in the marina. The balance is almost enough to operate all the county’s beaches.

But county officials say that they should get more in exchange for the 60-year leases they hold on lucrative marina properties.

In a series of tedious and expensive negotiations, the county is attempting to increase its share of the revenues, while business interests are fighting to keep rents down and protect their profits. The high stakes have triggered charges by each side that the other has negotiated in bad faith.

10-Year Arrangements

Roughly 100 Marina del Rey businesses are located on 56 separate sites leased from the county. Each of the leases runs for 60 years and most have a provision for renegotiation of rent after 20 years. Since most of the leases were signed in the early 1960s, they are now being renegotiated for another 10 years.

The county receives 20% of the revenue from boat slips, 7 1/2% from apartments and 3% from restaurants as rent, but officials have said those figures could rise to as high as 35% for slips, 15% for apartments and 5% for restaurants during renegotiation.

“Right now we get roughly 5% of the (total) revenue of the marina leaseholds,” said Victor Adorian, director of the county Department of Beaches and Harbors. “If that went up to even 10% that would be quite a bit of money, and 20% even more than that. And some of the appraisals come in even higher than that.”

Adorian said the county is appraising each property on its own merits. No one knows exactly how much the county stands to gain, he said.

Businessmen say that the county already gets enough of their money, according to Richard Hamlin, a lawyer representing most marina businesses in the negotiations with the county. Rents on many parcels should stay the same or go down, during the appraisals, Hamlin said.

At the heart of the debate over how much the county should get from Marina del Rey is the value of the land in relation to the improvements built there by businesses.

“The improvements are more important than the land,” Hamlin said. “Until these improvements were put in it was nothing but a mosquito bed. People want to be in this area because of the improvements that the lessees put in.”

‘Worth a Lot’

Hamlin said the $300 million spent by private developers at the marina is six times the amount government agencies spent for initial development of the property. “I think that everyone who knows real estate would disagree with him,” Adorian said. “The land out there is worth a lot of money.

“The improvements are worth a lot, too. But . . . the whole idea of the process is to determine what that value is.”

Those improvements are just one of the factors discussed by representatives of the county and the concern leasing the site during the negotiations. If both sides cannot agree on a new rent, a board of appraisers--composed of a county representative, a business representative and a neutral third-party appraiser--is established.

The three meet and compare information, including rents on similar facilities, until at least two can agree on the new rent.

Rents for 11 parcels are being set by arbitration panels and renters of eight parcels are attempting to settle without arbitration. Leases will continue to come up for renegotiation through 1993. Even then, the task will not be complete because a second round of renegotiations is scheduled to follow just 10 years after the first. The negotiations are likely to continue on one lease or another until the 2020s, when almost all marina leases expire and use of the land returns to the county.

Only one concern, the Del Rey Yacht Club, has settled its rent case without going to arbitration. The county will get 25% of the fees from Del Rey boat slips for the next 10 years, instead of 20%.

Arbitration on two other parcels left the county’s boat slip share at 20% and granted fractional increases in the county’s share of restaurant revenue.

Pay Hike

In just three years, the county has spent an estimated $500,000 on appraisals and renegotiations costs. Last week, the Board of Supervisors voted to increase the maximum pay for one appraiser from $7,000 to $50,000 for research and negotiation on two parcels that has spanned two years. It also agreed to pay legal fees if the appraiser is sued by lessees. Hamlin said businesses have spent similar amounts to present their positions.

County officials have two basic complaints about how businesses have handled the negotiations.

First, the businesses have been unwilling to complete their own appraisals at the start of the talks, Adorian said. He added that when county officials meet to discuss the rents, businesses simply say that the county wants too much, but present no figures to back their position.

The master lease on marina properties calls for renegotiations to be conducted with each side presenting an initial appraisal, as in condemnation cases, he said. “It becomes very evident that (lessees) do not want to negotiate the way that we want to,” Adorian said. “When they insist on rents at an equal or lower level to what they are now, then we end up in arbitration.”

Hamlin said the lessees refused to do their own appraisals at the beginning of negotiations because the work would have been ignored by the county.

“We don’t think an exchange of appraisals is negotiation,” Hamlin said. “Adorian feels he needs something in writing to back up his opinion. We don’t feel we need that. And it would be a waste of money.”

Data Demanded

Adorian also claimed that panels of appraisers that have appeared ready to rule in favor of the county have been “stonewalled” by lessees. “Where the third-party appraiser leaned toward the county, then the sessions were stalled out by the lessees,” Adorian said.

He claimed that lessees demanded more data or delayed meetings so that the six-month arbitration deadline would pass. Arbitration must begin all over again in such cases, Adorian said.

But Hamlin denied that lessees caused some appraisal boards to “fall apart.” One board disbanded after the county withheld information from the lessee, Hamlin claimed. Another dissolved when Hamlin refused to guarantee a third-party appraiser that he would not be sued as a result of the negotiations.

Hamlin said the county has caused the delays because the issue “has become a political football and the county is not dealing in good faith.”

He said Adorian has insisted on trying to maximize the county’s profit, without paying attention to the financial facts of each lessee’s case.

For at least four years, county officials have said that they should get a larger share of marina revenue, particularly after the Board of Supervisors decontrolled apartment prices this year, and have voted to remove restraints on boat slip prices in 1987.

In a 1983 lawsuit filed on behalf of Jackbilt Inc., Neptune Marina and Tahiti Marina Ltd., Hamlin asked a judge to order the county to share all its appraisal information with marina businesses.

Injunction Granted

Santa Monica Superior Court Judge Raymond Choate granted an injunction then to prevent either side from withholding appraisal information while arbitration hearings progressed.

In a countersuit, the county asked Choate to define the duties of each side in the arbitration sessions.

Last February, before the case could be heard, the county and Hamlin reached a tentative agreement that sets a timetable and specific duties for the arbitration board hearing the Neptune Marina case. If all goes according to plan, the appraisers will complete their work and suggest rent adjustments by the end of May.

The agreement might lead to settlement of the rest of the suit and possibly provide a model for arbitrating rents for the rest of the marina. “We’ll wait and see what happens,” said assistant county counsel Robert W. Rodolf.